Approaches to Economic Development

Approaches to Economic readingTHE ECONOMICS OF DEVELOPMENT CONCEPTS AND APPROACHESMeaning of the term Economic phylogenesisActually, in that location are broadly 2 main onward motiones to the concept of scotch information The Traditional Approach or The Stages of Economic Growth Theories of the 1950s and the archean sixties.The New Welfare Oriented Approach or The Structural-Inter matterist Models of the late 1960s and the 1970s.1.The Traditional Approach The thinking of the 1950s and early 1960s focused mainly on the concept of the stages of stinting growing. Here the offshoot of development was viewed as a series of successive stages through which all countries had to pass. The propounders of this approach advocated the necessity of the office quantity and mixture of saving, investment and foreign aid to enable the LDCs to proceed on an economic crop route. They based their conclusions on the item that this economic path historically had been followed by most of t he more developed countries. Thus, in this period development had become synonymous with rapid, aggregate economic increment.This approach defined development strictly in economic terms and it implied A sustained annual improver in the GNP at lay outs varying from 5 to 7 pcpa or moreSuch changes in the mental synthesis of production and employment that the share of agriculture declines in both, while the share of manufacturing and the tertiary sectors append.The policy measures that were suggested in this period were the ones which induced industrialization at the expense of agricultural development. The objectives of p all overty elimination, economic inequalities reduction and employment generation were mentioned but only as a passing reference. In most cases it was assumed that the rapid gains in overall growth in the GNP would trickle-down to the masses in one form or the other.2.The New Welfare Oriented ApproachJacob Viner was probably the first economist (1950s) to argue that an economy could non boast of having achieved economic progress if the incidence of poverty in that economy had non diminished. But it was in the early 1970s that economists began to realize that Jacob Viners stance was relevant, as nearly 40 % of the developing dry lands world had not benefited at all from the rise in the GNP and from the structural changes that had taken place in their respective economies during the 1950s and 1960s.Hence, in the 1970s it became necessary to redefine the concept of economic development. This modern approach views underdevelopment in terms of international and domestic power relationshipsinstitutional and structural economic rigidities and,the proliferation of dual economies and dual societies both within and among the nations of the world.This approach places emphasis on policies that would lead to the eradication of poverty, provide more diversified employment opportunities, and reduce income inequalities. This approach insists that the se and the other egalitarian objectives have to be achieved only within the socio-economic context of the respective growing economy. Thus today, economic development is a process whereby the ordinary economic well-being (especially of the masses) of an economy is affected for the better.Meier defines economic development very concisely asDevelopment is the process whereby the real per capita income of a country increases over a long period of time subject to the stipulation that the number below an absolute poverty line does not increase and that the distribution of income does not become more unequal.This definition thus highlights the following aspects of the term economic development 1.Development is a PROCESS Today, development implies the operation of genuine socio-economic forces in an interconnected and causal fashion. This interpretation is more meaningful than merely to identify development with a set of conditions or a catalogue of characteristics.2.Development is a RI SE IN THE REAL PER CAPITA INCOME Since today the development of a poor country arises from a desire to remove its mass poverty, the primary object should be a rise in the real PCI rather than simply an increase in the economys real national income, uncorrected for changes in the population. Simply increase the real national income does not guarantee that there would be an expediency in the general living standards of the masses. If the population growth roll surpasses the growth of national output or even runs parallel with it, the result would be a falling or at best a uniform PCI and as this would not be beneficial to the masses, it cannot be considered as development.3.Development can take place only over a LONG finale OF TIME This time period is significant from the stand-point of development being a sustained increase in the real income and not simply as a short-period temporary rise, such as occurs during the upswing of the business cycle. The underlying continuous upward trend in the growth of the real PCI over at least two or three decades is a strong indication that the process of development is on the right track.4.Development must lead to a DECREASE IN SIZE OF THE ABSOLUTELY POOR Given the new orientation of the development thought, it is necessary that the quality of life of the masses must improve in fact improve to the extent of in reality showing a fall in the amount of tidy sum living below the poverty line. This would automatically require, as suggested in the definition, a reduction in the economic inequalities in the economy. To achieve this goal, it is necessary that the policies implemented should actually divert economic power towards the economically vulnerable groups in the economy. The policies should aim at aggrandizement the real PCI, causing a diminution in economic inequality (ie., an alleviation if not an eradication of poverty), ensuring a stripped level of consumption, guaranteeing a certain socially relevant compositi on of the national income, reducing unemployment to a tolerable low level and removing regional development disparities.The theoretical account of development as given by Charles P. Kindleberger and Bruce Herrick reiterates the improvement-of-the-masses emphasis of Meiers definition. Kindleberger and Herrick maintain that economic development is generally taken to include Improvement in actual welfare, especially for persons with the lowest incomes, the eradication of mass poverty along with its correlates of illiteracy, disease, and early deathChanges in the composition of inputs and outputs that generally include shifts in the underlying structure of production away from agricultural and towards industrial activitiesOrganizing the economy in such a way that productive employment is general among the working age population and that employment is not a privilege of only a minority and,Increasing the degree of participation of the masses in making decisions about the directions, ec onomic and otherwise, in which the economy should move to improve their own welfare.The Economic Growth V/s Economic Development dEBATEThe stress on the improvement in the quality of life of the masses has made it imperative to distinguish between the growth-oriented approach of the 1950s 1960s and the modern development-oriented approach of the late 1960s 1970s ie., the distinctions between Economic Growth and Economic Development must be highlighted.1.Definitional differences Economic growth is a pure economic process whereby there is an increase in the economys GNP ascribable to the increase in the productive electrical capacity of the economy. Economic development, on the other hand, is a multi-dimensional process involving major changes in the social structures, popular attitudes and national institutions, as well as the acceleration of economic growth, the reduction of inequality and the eradication of absolute poverty.2.Differences in the objectives Economic growth aims atIncreasing the size of the GNP, without actually considering the social relevance of the composition of the national income.Removing all the obstacles that could come in the way of increasing the economys productive capacity, eg., removing the market imperfections that exist in the economy.Supplying the missing components like capital, foreign exchange, technology, skills and management, which are needed for improving the economys productive capacity.Hoping that the benefits of the increased capacity of the economy would some how reach the masses.Economic development, on the other hand, aims at Increasing the availability and widening the distribution of basic life-sustaining goods such as food, shelter, health and protection.Raising the level of living including, in addition to higher incomes, the provision of more jobs, better education and greater attention to cultural and humanistic values, all of which serve not only to enhance material well-being but as well as to generate greater single(a) and national self-esteem.Expanding the range of economic and social choice to individuals and nations by freeing them from servitude and dependence, not only in relation to other people and nations, but also from the forces of ignorance and human misery.Thus, we see that the goals of economic growth are rather narrow in scope, while those of economic development are more broad-based in spirit and in scope.3.Differences in the overall approach a.Quantitative versus Qualitative Approaches According to Kindleberger, economic growth meaning more output, while economic development implies not only more output but also changes in the technical and institutional arrangements by which it is produced and distributed. Growth involves more output derived from greater amounts of inputs and with greater efficacy but, development implies changes in the composition of the output and in the allocation of the inputs to the different sectors. Thus, growth is link to a quantita tive sustained increase in the PCI attach to by the expansion in its labour force, consumption, capital and volume of trade, while economic development is related to qualitative changes in economic wants, goods, incentives and institutions.b.Revolutionary vivify versus Evolutionary Speed Approaches Economic growth implies a certain degree of rapidity in the change process. Changes are introduced at a brisk rate and without a sufficient preparation of the socio-eco-politico foundations of the economy. Projects are literally imposed on the economy to create a global impression of progress. The masses are every not taken into confidence or are not considered vis--vis the new count ons. The rapid changes caused by the Revolutionary Approach of economic growth ensure the reverse of the system within a short time.Economic Development, on the other hand, adopts a more Evolutionary Approach ie., it first ensures that the socio-eco-politico foundations are readied for the change. Hence, when the change actually takes place, it is readily and popularly accepted and supported. Thus, development involves creating a sense of awareness and a feeling of participation among the masses in the economy. This makes the development process painstakingly slow, long and drawn-out but it is this gradualness in approach that actually strengthens the economy in the long run.c.Only Immediate Gains versus Also Futuristic Gains Approaches The gains that lessen from economic development are far more sustaining than those made from growth, simply because of the differences in the way the incoming of the to-be-introduced projects are anticipated, analyzed and appreciated. Economic growth means increasing the economic activities, irrespective of whether the economy can continue supporting the newly introduced economic activity in the long run or not. For instance, along the lines of economic growth, an LDC would increase its current steel producing capacity, but it would not be able to keep up this new capacity for more than a a few(prenominal) years. Hence, within a few years, the increased capacity would lay wasting leading to a wastage of scarce resources. Economic development, on the other hand, would consider the future sustaining capacity of the economy before actually increasing the steel capacity. If and only if the economy can continue supporting this higher rate in the future, the capacity would actually increase. Thus, economic development guarantees that the scarce resources are currently used fruitfully and appropriately.d.Only Economic versus Also Environmental concern Approaches Economic growth, due to its rapid approach, more often than not, causes harm to the environment natural and/or social. Projects are undertaken without considering the cascading effects that could follow in the form of natural environment degradation, pollution, overcrowding, increase in crime rate, bottlenecks in infrastructural facilities, etc. For instance, an economy, for growths sake, could undertake an irrigational project without either making a thorough study of or without sympathize with about its ramifications on the natural and social environment.Economic development, on the other hand, insists on the conservation and the protection of the natural and social environment. If a certain project could cause any sort of significant damage to the environment, that project would be either abandoned or altered. If the above mentioned irrigational project was approached from the development point of view, its place would be either changed, or its dimensions altered to prevent natural environmental harm and if there is any sort of social environmental damage, like transmutation of the inhabitants, then, rehabilitation projects would be undertaken, in consultation with the affected people.e.The Trickle-Down versus The Direct-Attack Approaches Economic growths, primary goal is to increase the productive capacity of the economy massively, irrespecti ve of whether or not the poorer sections would benefit from this higher capacity. In fact, growth works on the assumption that the benefits that accrue from the increase in capacity would some how or the other trickle-down to the masses. Thus, growth makes no deliberate attempt ensure that the benefits do reach the poorer sections of the economy. The objectives of poverty eradication, economic inequalities reduction and employment generation are mentioned but only as a passing reference, as secondary gains that may or may not occur. Growth has a sort of an in-built tendency to bypass those very people in the economy who deserve to be supported the most by it.Economic development, on the other hand, by directly attacking economic misery, ensures that the benefits of the increase in the productive capacity actually reach the masses. The policies aim at diverting economic power towards the economically weaker sections of the economy. The policies directly aim at raising the real PCI, c ausing a diminution in economic inequality, ensuring a minimum level of consumption, guaranteeing a certain socially relevant composition of the national income, reducing unemployment to a tolerable low level and removing regional development disparities.4.Interrelationship between Economic Growth Economic Development Although economic growth and economic development are indeed very different in their approaches, there exists an inter-relationship between them. It is difficult to conceive of development without growth. In low income countries, for instance, a substantial increase in the GNP is needed before they can hope to overcome their problems of poverty, unemployment and occupational distribution. However, it is possible to have growth without development, as growth is not concerned with the social aspects of an economy. In short, since development is a broader concept it encompasses growth and therefore can be said to be directly related to growth. Thus, development is growth with a human face.ReferencesTodaro, M.Economic Development in the Third World. Chs 1 and 3Meier, G.Leading issues in Economic Development. Ch 1 (1-A)Misra PuriEconomics of Growth and Development (4th Ed) Ch 1Jhingan, M. L.The Economics of Development and Planning. (28th Ed) Ch 1Mukherji, SampatModern Economic Theory Ch 50